Alcohol stocks continue to generate strong profits and steady growth, even during recessions. In turn, their shareholder dividends tend to hold up during bear markets. The reason is because alcohol stocks have seen their demand remain intact (or even increase) during hard economic times.

The following 3 alcohol stocks have generated strong returns over the years, and could continue to produce positive shareholder returns and dividends.

Alcohol Stock #1: Diageo plc (DEO)

Diageo is one of the largest beverage companies in the world, with a market capitalization near $100 billion. It is also one of the world’s oldest companies, tracing its history all the way back to the 1600s. Diageo is a true alcohol conglomerate, with a huge brand portfolio.

Diageo owns 20 of the world’s top 100 spirits brands. A few of its core brands include Johnnie Walker, Smirnoff, Captain Morgan, Baileys, Tanqueray, Guinness, Crown Royal, and Ketel One.

For the first half of the year, net sales improved 18.4% while organic growth totaled 9.4%. Pricing and mix added 7.6%, with volume contributing a gain of 1.8% even as the company lapped another challenging comparable period.

Each region had organic sales growth, led by a 20% gain in Latin America and Caribbean, a 17% improvement in Asia Pacific, a 10% increase in Europe, and 3% growth in North America. More than 75% of the portfolio maintained or gained market share. Super Premium brands had organic sales growth of 12%. Guinness, Don Julio, Casamigos, Smirnoff, and Capitan Morgan had organic sales growth of 15%, 20%, 27%, 6%, and 1%, respectively.

Analysts expect Diageo to earn $8.43 in fiscal year 2023, down from $8.54 previously. This would be a 12.9% increase from the prior year.

Diageo pays a semi-annual dividend. Diageo’s current annualized dividend totals ~$3.63 per ADR, for a current yield of approximately 2%. We expect the company to continue to raise the dividend at around 5% annually for the foreseeable future.

Alcohol Stock #2: Constellation Brands (STZ)

Constellation Brands produces and distributes beer, wine, and spirits. It is a highly diversified company with over 100 brands in its portfolio, including beer brands such as Corona, wine brands including Robert Mondavi and Clos du Bois, and liquor brands such as SVEDKA, Casa Noble, and High West.

On June 30th, 2023, Constellation Brands reported first quarter fiscal 2024 results for the period ending May 31st, 2023. (Constellation Brands’ fiscal year ends on the last day of February). For the first quarter, the company recorded $2.5 billion in net sales, a 6% increase compared to the same prior year period, surpassing analysts’ expectations by $40 million.

Beer sales improved by 11% year-over-year, while wine and spirits sales declined by -10%. Earnings-per-share equaled $2.19 for the first quarter, which was a 9% increase compared to fiscal Q1 2023, and 8 cents ahead of analyst estimates. Constellation Brands provided its fiscal 2024 outlook. The company expects adjusted earnings-per-share to be $11.70 to $12.00 for the full fiscal year. In addition, beer sales are anticipated to increase 7% to 9%.

Constellation Brands has a 1.3% dividend yield, along with a high dividend growth rate. Constellation Brands declared a $0.89 quarterly dividend on April 6th, 2023, which represented an 11% increase. This makes Constellation Brands an attractive pick for dividend growth investors.

Alcohol Stock #3: Brown-Forman (BF-B)

Brown-Forman has a long history of growth, thanks to its core brand Jack Daniel’s. The company has a broader spirits portfolio including other top-tier brands like Herradura, Woodford Reserve, El Jimador, and Finlandia.

Brown-Forman reported its fourth quarter (fiscal 2023) earnings results in June. The company announced that it generated revenues of $1.05 billion in the period, which was up 5% from the revenues the company generated during the previous year’s quarter. Brown-Forman’s revenues came in above the analyst consensus, beating it by $60 million, or around 6%.

The sales growth rate during the quarter was stronger compared to the previous quarter, partially due to an easier comparison with the quarter one year earlier. Brown-Forman’s earnings-per-share totaled $0.43 during the fourth quarter, which was in line with the consensus analyst estimate. Earnings-per-share were up by 36% compared to the previous year’s quarter.

Brown-Forman has a long streak of annual dividend increases. It has increased its dividend for 39 consecutive years, which makes it a member of the Dividend Aristocrats list. The Dividend Aristocrats are a group of just 65 stocks in the S&P 500 Index that have each raised their dividends for 25+ consecutive years.

Brown-Forman’s dividend payout ratio has been extremely stable over the last decade, as the company paid out between 35% and 40% of its net profits during almost every year. The reliable dividend growth track record and the low payout ratio mean that Brown-Forman’s dividend looks highly sustainable and very safe.

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